Wall St. climbs as GDP data eases fear of Fed pullback

NEW YORK (Reuters) - Stocks rallied for a second day on Wednesday, recouping some recent losses on reduced concern that the Federal Reserve will begin to withdraw its stimulus in the near future.

The broad-based advance lifted the S&P 500 above the 1,600 threshold for the first time since last Thursday. Stocks have recently sold off after the Fed said it is moving closer to reducing its monthly bond-buying efforts, but the last two days of buying show some believe the market has overreacted.

“The market is broadly being traded up today, and I think there are a lot of people out there that are trying to put cash to work and get out of fixed income,” said Brian Amidei, managing director and partner at HighTower Palm Desert in Palm Desert, California.

The rally followed data showing the U.S. economy grew at an annual rate of 1.8 percent in the first quarter, well below expectations for gross domestic product to grow at a 2.4 percent annual rate.

While the GDP data looks backward and includes the start of cutbacks in federal spending, analysts said it could influence the Fed’s considerations of whether the economy is strong enough for it to begin scaling back its $85 billion a month in bond purchases. Should this contribute to keeping the Fed from moving sooner, it would be seen as supportive for stocks.

Stocks have been closely tied to the central bank’s easy money policy, with the Dow and the S&P 500 hitting a series of record closing highs as investors bet that the bond buying would remain in place, and then dropping dramatically on hints that the stimulus could be reduced before the end of the year.

A trader looks up at a screen on the floor at the New York Stock Exchange, June 25, 2013. REUTERS/Brendan McDermid

The Dow Jones industrial average .DJI rose 149.83 points or 1.02 percent, to end at 14,910.14. The S&P 500 .SPX gained 15.23 points or 0.96 percent, to finish at 1,603.26. The Nasdaq Composite .IXIC added 28.34 points or 0.85 percent, to close at 3,376.22.

Volume was about average, with 6.48 billion shares traded on American exchanges.

The S&P 500 gained 1.9 percent over the past two sessions, its best two-day rally in three weeks following a massive selloff. Last week, the S&P 500 index posted its worst week since April. The benchmark index remains 4 percent below its all-time closing high of 1,669.16 reached on May 21.

Tech companies’ shares advanced following bullish comments from analysts. Adobe Systems Inc (ADBE.O) rose 3 percent to $45.68 after Jefferies & Co upgraded the stock to “buy” from “hold,” citing expectations for more new users. Microsoft Corp (MSFT.O) climbed 2 percent to $34.35 after Morgan Stanley raised its rating to “overweight” and increased its price target on the stock to $40.

On the downside, gold stocks slid as the precious metal fell to its lowest in almost three years, putting it on course for a record quarterly loss.